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The consumer groups argue that, by exempting overdraft loans from the Truth in Lending rules, regulators are allowing financial institutions to hide the often astronomical costs of the service — costs that can mean tripled and even quadrupled interest rates by the time the account holder repays his overdraft.

A Government Accountability Office study found that insufficient funds and overdraft fees were the highest of all types of fees financial institutions charge, on average $24 to $26 each. Some banks also charge a $2 to $5 fee for each day the account balance remains in the red.

Bringing overdraft loans under the Truth in Lending Act would require banks to disclose the interest cost to consumers in terms of the annual percentage rate.

“How is a cash-strapped consumer supposed to tell what’s more expensive when one of the highest-cost cash products on the market doesn’t come with an APR?” Gail Hillebrand, senior attorney for Consumers Union, asked in a statement after the Fed proposal came out.

Consumer groups have generated a number of research papers to further illustrate the economic cost of overdraft loans. Just this month, the Center for Responsible Lending released a study showing Americans ages 55 and older pay $4.5 billion in overdraft fees each year, with nearly $1 billion coming from seniors heavily dependent on Social Security income.

The banks fought back with their own data. In response to the center’s report, the American Bankers Association re-released its own survey, which found that 91 percent of seniors have not paid overdraft fees in the past year.

And for those people of any age who did pay the fee, 88 percent said they were glad the payment was covered.

As part of its defense, the bankers association is highlighting the need for consumers to take responsibility for their finances and suggesting various ways to avoid fees. These include signing up for e-mail alerts notifying when the account balance falls below a certain point, keeping a “cushion” of money in a checking account, and linking the checking account to a line of credit or savings account as a less expensive overdraft option.

Financial institutions and their trade associations plan to write their own comment letters on the Fed rules. Banks and credit unions alike object to bringing overdraft loans under Truth in Lending rules, arguing that expressing the charges in terms of an APR would not help consumers.

“We’re all for disclosure,” said Mary Dunn, the Credit Union National Association’s senior vice president and associate general counsel of regulatory advocacy.

But disclosing the APR wouldn’t give consumers a clear picture of the product, she said, given its short-term nature and particular structure.

“It’s going to look like the percentage rate is really exorbitant when it isn’t,” based on the cost to the consumer, she said.

The credit union association, she added, urges its members to reach out to consumers who are repeatedly hit by overdrafts to offer counseling and other financial options.